Hitech manufactures two products: regular and super. The results of operations for 20x1 follow. Regular super total units 12,000 4,200 16,200 sales $312,000 $798,000 $1,110,000 less: cost of goods sold 240,000 420,000 660,000 gross margin $72,000 $378,000 $450,000 less: selling expenses 72,000 240,000 312,000 operating income $0 $138,000 $138,000 fixed manufacturing costs included in cost of goods sold amount to $3 per unit for regular and $20 per unit for super. Variable selling expenses are $4 per unit for regular and $20 per unit for super; remaining selling amounts are fixed. Hitech wants to drop the regular product line. If the line is dropped, company-wide fixed manufacturing costs would fall by 10% because there is no alternative use of the facilities. What would be the impact on operating income if regular is discontinued
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Hitech manufactures two products: regular and super. The results of operations for 20x1 follow. Regular super total units 12,000 4,200 16,200 sales $312,000 $798,000 $1,110,000 less: cost of goods sold 240,000 420,000 660,000 gross margin $72,000 $378,000 $450,000 less: selling expenses 72,000 240,000 312,000 operating income $0 $138,000 $138,000 fixed manufacturing costs included in cost of goods sold amount to $3 per unit for regular and $20 per unit for super. Variable selling expenses are $4 per unit for regular and $20 per unit for super; remaining selling amounts are fixed. Hitech wants to drop the regular product line. If the line is dropped, company-wide fixed manufacturing costs would fall by 10% because there is no alternative use of the facilities. What would be the impact on operating income if regular is discontinued